Ofgem orders four energy suppliers to repay £31m to customers overcharged on direct debits

Four energy suppliers have been ordered to return £31m to more than 140,000 customers after Ofgem found they had set direct debits far above what households were using and then sat on the surplus for more than a year.

The regulator said on Tuesday that Tidewell Energy, Brightmoor Power, Halcyon Gas & Power and Northern Reach Energy had breached rules introduced in 2023 that require suppliers to review direct debits at least twice a year and to refund credit balances on request. Customers at the four firms were holding average credit of £212, and in 1,900 cases more than £1,000, when the regulator carried out its review in the spring.

Tidewell, the largest of the four with about 900,000 customers, accounts for £18m of the total. It will pay £12.4m directly to affected households and £5.6m into the regulator’s redress fund. The other three will refund between £2.1m and £6.3m each. All four have been told to overhaul their billing systems by the end of the year or face further enforcement.

Ofgem said the money was not merely an accounting matter. “These are households that were paying for energy they had not used, in some cases through a winter when they were cutting back on heating,” a spokesperson said. “Suppliers are allowed to hold a reasonable buffer. They are not allowed to use their customers as a source of interest-free working capital.”

Tidewell’s chief executive, Jonathan Pryce-Ellis, apologised and blamed a migration to a new billing platform in 2024 that “failed to recalculate direct debits for a significant cohort of customers”. He said all affected households would receive their refunds by the end of November and that the company had already lowered payments for 340,000 customers since July. “We got this wrong and we are fixing it,” he said.

Consumer groups said the case showed how little had changed since the energy crisis. Dr Rosalind Achebe, director of the campaign group Fair Fuel Future, said: “Three years ago the regulator promised that suppliers would never again be able to build their balance sheets on customer credit. Here we are. The fines are welcome, but the problem is structural: direct debits are set by algorithms that nobody checks.”

Ofgem’s review found that across the whole market, suppliers were holding £2.9bn in customer credit at the end of September, down from £3.4bn a year earlier but still well above the level the regulator considers justified. It said it was examining a further six suppliers and expected to announce the results by Christmas.

Customers of the four companies do not need to take any action to receive their refunds, which will be credited to their accounts or paid by bank transfer. Anyone who believes their direct debit is too high can ask their supplier for a review and, if refused, complain to the Energy Ombudsman.